What you CAN do when in bankruptcy in Colorado

I always advise prospective clients about the potential pitfalls that can befall a client during the bankruptcy process.  At the same time, it’s also important for the client to know what he/she can do to best navigate through the bankruptcy process.  This may include taking the following steps:

-Due to the complexity of the new Colorado laws, it’s strongly advisable to seek an experienced Denver bankruptcy lawyer.

-Make sure that you provide your Denver bankruptcy lawyer with information as to all secured and unsecured creditors.  (I always ask for the name/address of creditors, as well as balance owed and account numbers, if known.) A given debt may not be discharged if not listed on the bankruptcy schedules.

-Do not make any decisions financially that could give the judge, trustee or any creditors the impression that the bankruptcy has been filed fraudulently.  In other words, be honest and forthright at all times.

-Always keep up the date on the filing of Federal and Colorado state tax returns for the past four tax years.  This is required to be eligible for either chapter 7 or chapter 13 in Colorado.

-Because expected income tax refunds are not exempted from the bankruptcy estate (e.g. the trustee can take the tax refund), lower your tax withholding so that you don’t receive a tax refund (but, not to the point where you will owe a large tax liability).

-Timely and fully make all secured debt payments (most commonly a home or car) as these obligations are likely to be paid directly to the lender outside of the bankruptcy process.  It’s also important not to fall too far behind on any secured debt payments for property you wish to retain as this amount may need to be “cured” as arrears in chapter 13, thus increasing the plan payment to be made to the trustee and unsecured creditors.

-Higher income filers in Colorado should always consider making a qualified retirement plan (401K or IRA) contribution to the extent consistent with the IRS and Colorado tax laws to reduce disposable income.  A qualified retirement plan contribution may reduce plan payments in a chapter 13 bankruptcy and/or convert non-exempt property into property exempt from the bankruptcy estate and the reach of unsecured creditors.

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